Is It Possible To Get A Mortgage After Chapter 7?

Real Estate Investor from Houston, Texas

posted 6 months ago

A friend would like to buy the townhome she has lived in for 10 years because the owners want to sell it immediately. Due to a divorce, she filed chapter 7 bankruptcy with a discharge date on March 14, 2017. Her credit score is roughly 630, she has worked in the same place for the last 5 years, and last year was approved for a 12K car loan which is halfway paid off.

Do you think she would be able to be approved for a mortgage to buy a townhouse at 125K?

If not, what unconventional options do you think she should look into?

She has already spoken with a hard money lender who wants to charge 9% for a 24-month note... That's why she came to me so that I could loan her the money for a lesser interest rate.

Rental Property Investor from Sacramento, CA

replied 6 months ago

@Frank S. There are options for her to get a loan now. They would be unconventional as the BK was recent and conventional lenders want that to be seasoned. Hard money is not a good idea as that would need to be paid back short term.

Is she able to show good income on bank statements? How much does she have down? There are other options but the rate will be high of course with the situation. 9% is too high though...

Real Estate Agent from Las Vegas, NV

replied 6 months ago

Usually takes 2 years after discharge but she would need a higher down payment and pay a higher interest rate . It is possible to get a loan after 12 months from discharge if the bankruptcy was no fault of her own.

Rental Property Investor from Harrisburg, PA

replied 6 months ago

@Frank S. it is surely possible. Based on my 3 decades of lending in the car business a mortgage is easier to get approval for in her situation than a car loan. (You can't hide a house). I cannot speak for her employment or income qualifications or whatever else is still showing on her bureau (Inside or outside the BK) or if anything has been reestablished since or carried through the discharge. But I see it all the time. Literally.